The higher-income bracket will be negatively impacted while low-to-middle income will largely benefit from the change in income tax rates.

Income Tax Tables (Year 2018-2022)

Gross Income Per Year

Income Tax Rate

P250,000 and below

0%

P250,000 – P400,000

20%*Excess over P250,000

P400,000 – P800,000

P30,000 + 25%*Excess over P400,000

P800,000-P2,000,000

P130,000+ 30%*Excess over P800,000

P2,000,000 – P8,000,000

P490,000+ 32%*Excess over 2,000,000

P8,000,000

P2,410,000+ 35%*Excess over P8,000,000

Income Tax Tables (Year 2023 onwards)

Gross Income Per Year

Income Tax Rate

P250,000 and below

0%

P250,000 – P400,000

15%*Excess over P250,000

P400,000 – P800,000

P22,000 + 20%*Excess over P400,000

P800,000 – P2,000,000

P102,500 + 25%*Excess over P800,000

P2,000,000 -P8,000,000

P402,500 + 30%*Excess over P2,000,000

P8,000,000

P2,202,500 + 35%*Excess over P5,000,000

2. Other changes in Taxation to be highlighted:

Tax for Mixed Income Earners

A taxpayer whose gross sales/receipts are at or below the VAT threshold shall have the option to avail of the 8% income tax on gross sales or receipts and other non-operating income in excess of PHP 250,000, in lieu of the graduated income tax rates and percentage tax.

Exclusion from Gross Income

Compensation income shall be subject to the graduated tax rates on compensation income.

Income from business or practice of profession:

If total gross sales and/or gross receipts and other non-operating income do not exceed the VAT threshold, it shall be subjected to the graduated tax rates on taxable income OR the 8% tax on gross sales/receipts and other non-operating income, at the option of the taxpayer;

If total gross sales and/or gross receipts and other non-operating income exceed the VAT threshold, it shall be subjected to graduated rates on compensation income.

Fringe Benefit Tax (FBT)

The FBT rate is increased from 32% to 35% and the gross-up factor in computing the grossed-up monetary value of the fringe benefit is 65%.

Optional Standard Deduction (OSD) for individuals earning business income

An individual subject to graduated tax rates, other than a nonresident alien, may elect to claim the OSD in an amount not exceeding 40% of his/her gross sales/receipts or gross income respectively.

“GPPs” and the partners comprising such partnership may avail of the OSD only once (either by the GPP or the partners).

Individuals not required to file income tax returns (“ITR”)

An individual whose taxable income does not exceed PHP 250,000.

Employees receiving purely compensation income from only one employer, the income tax of which has been withheld correctly, shall not be required to file an annual ITR. The certificate of withholding filed by the employer, duly stamped “received” by the BIR, shall be tantamount to the substituted filing of the ITR.

Installment payment of income tax

The first installment shall be paid at the time the return is filed and the second installment on or before 15 October following the close of the calendar year.

Deadlines for tax declaration of individuals

The last day for the declaration of income for the current year shall be moved from 15 April to 15 May of the following year.

Likewise, the deadline of the fourth quarter payment for individuals earning self-employed income shall be moved to 15 May of the following year.

Tax on sale, barter, or exchange of shares of stocks listed and traded through the local stock exchange or through IPO

Stock transaction tax will be increased from ½ of 1% to 6/10 of 1%.

Tax on capital gains from sale of shares of stock not traded in the Stock Exchange

Capital gains tax will be increased from 5% (for amounts up to PHP 100,000) and 10% (for amounts in excess of PHP 100,000) to a fixed rate of 15%.

3. Changes in Philippines taxation due to the Tax Reform for Inclusion and Acceleration (TRAIN)

Tax compliance-related amendments to the Tax Code: (1) Changes in the top rate for expanded withholding tax (EWT) and the (2) filing deadline for the final withholding tax (FWT) and EWT returns.

(1) Ceiling of EWT ratesAs of 1, 2019, the EWT rates will range from 1% to 15%. Prior to this, the top rate was at 32%. While the said change is not yet in effect, the Bureau of Internal Revenue (BIR) has advised the reduction of the EWT rates for the following income payments to 8% from 10% or 15%:

(a) Professional fees, talent fees, commissions, etc. for services rendered by individuals
(b) Income distribution to beneficiaries of estates and trusts
(c) Income payment to certain brokers and agents
(d) Income payments to partners of general professional partnerships
(e) Professional fees paid to medical practitioners
(f) Commission of independent and/or exclusive sales representatives, and marketing agents of companies

Previous EWT rates for the said income payments were based on Revenue Regulations (RR). Normally, an RR is amended by the issuance of another RR. To reiterate, the advice on the reduction of the above EWT rates are processed via Revenue Memorandum Circulars (RMC). Assuming that this was not done properly, and a taxpayer would be subjected to a deficiency tax assessment. Due to an erroneous written official advice of a revenue officer, there appears to be basis to argue for the abatement or cancellation of penalties and/or interest on the deficiency tax assessment.

(2) Filing deadline for FWT and EWT returns Filing frequency of FWT and EWT returns has been changed from a monthly to quarterly basis. The current stipulated deadline is on the last day of the month following the close of the quarter during which the withholding was made. For example, for the first quarter (i.e. January to March), the filing deadline would be 30th of April.This eases the compliance burden of taxpayers by reducing the number of FWT and EWT returns to be filed from 12 monthly returns to 4 quarterly returns. However, in the absence of the implementing RR (IRR), the following are some of the practical compliance issues taxpayers are faced with:

(a) Whether or not the BIR will issue new quarterly FWT and EWT returns
(b) Whether or not alphalists of payees will still be required
(c) Whether or not the new FWT and EWT returns will be available on or before the filing deadline
(d) Whether or not taxpayers will be provided enough time to adapt to the said returns

The Employment Insurance System (EIS) has just been passed by the Parliament of Malaysia. The country saw to a loss of more than 38,000 jobs, especially in the retail, manufacturing and quarrying sector in 2016. Being a trading nation, Malaysia is highly susceptible to disruptions in the global economic chain. Therefore, the EIS 2017 Bill was thus conceived as a financial buffer from from ill effects of economic downturns.

Compliance

The EIS Act went into effect on January 1, 2018 and all companies or enterprises with one or more employees are required to comply. Contributions were initiated since 1 January 2018 and payouts for retrenched workers will begin in 2019. Exemptions are only applicable to the self-employed, public servants, domestic helpers and foreign workers. The EIS serves as a safeguard measure to assist retrenched workers through funding from both employers and employees. The meaning of Loss of Employment is stipulated under section 30(1) & (2) of the Act. It also extends to retrenched staff who experienced sexual harassment or constructive dismissal at the workplace. This scheme is administered by the country’s Social Security Organisation (Sosco), to provide temporary financial assistance up to six months for each retrenched employee.

Contribution Rate

The contribution rate for the EIS consists of 0.2% from the employer and 0.2% of the employees’ monthly salary, totaling to 0.4% contribution. A fixed rate basis based on salary are employed, subjected to a monthly contribution cap of RM59.30 for those with earnings RM4,000 and above.

Increased Productivity

Complementing financial assistance, the Insurance system includes training programmes, re-skilling, career counseling and job-seeking assistance which were designed to help the Insured Persons (IP) return to the workforce as soon as possible. Employees at an age range of 40-50 are most likely to benefit from this scheme. Losses from any business contraction, downsizing or bankruptcy can be moderated.

Penalties

Failure to comply with EIS would result in a hefty fine not exceeding RM10,000 or imprisonment for a term no more than two years, or both, upon conviction.

At Your Service

AYP Malaysia provides comprehensive HR and payroll services that ensure continuous compliance with the new EIS. Contact us for error-free payroll processing for monthly financial contributions.

As of YA 2018, the total amount of personal income tax is subject to an overall relief cap of $80,000 per YA. The cap on personal income tax relief applies to the total amount of all tax reliefs claimed, including any relief on voluntary CPF contributions made. Individuals who have met the qualifying conditions should continue to claim the personal reliefs.

This measure is expected to generate $100 million worth of additional tax revenue a year. This engenders a more progressive tax system, affecting only 1% of tax-resident individuals. SMU Professor Sum Yee Loong, a former Deloitte tax partner, remarked that the cap was a wise move. High income earners making S$150,000 or S$300,000 a year are affected, while the middle-income bracket earning S$50,000 to S$80,000 a year are not implicated. However, this change will also impact working mothers who are higher wage earners with two children as well as some lower-income taxpayers. Taxpayers who have parents, grandparents and disabled family members in their care can also expect to take up the additional burden.

Singapore’s personal income tax burden remains low and most Singaporeans are in support of the new cap. In addition, this tackles a potential loophole in the tax system and prevents further exploitation from certain group of taxpayers. This refers to self-employed individuals that divert some earnings to their spouses who may not be wholly responsible in income generation.

To find out whether you have reached the cap on personal income tax relief, click here to access to IRAS’s tax calculator.

Removal of tax concession on home leave passages for expatriate employees

The tax concession of taxing only 20% of the value of home leave passages for expatriate employees will be removed with effect from YA 2018.

The home leave passages provided to expatriate employees, their spouses and children are taxable in full.

Real Estate

Recent global events such as the Brexit referendum, the United States’ presidential election and China’s slow economic growth have impacted many markets and economic conditions. A reserved approach to office expansions and industrial space commitment echoes the business sentiments for investments in the real estate industry. Moreover, there is a supply overhang in commercial properties that has led to weaker performance in price and rentals.

As such, property developers are not looking to develop new estates. They are expected to focus on selling or leasing existing units. Consequently, this indicates a demand for experienced residential & commercial leasing managers with strong business acumen, as well as asset & portfolio managers. Additionally, the Singapore Government has committed to the development of the Industry Transformation Map (ITM) for the Real Estate Industry’s jobs and growth strategy, which will be released within the year 2017.

Thailand Key Industries

Food and Agriculture Industry Capabilities

Thailand is one of the largest producers and exporters of food globally, positioning itself as the “Kitchen of the World.” The top five exports are rice, sugar, chicken, tuna, and shrimp – which represented 50% of total food exports

Thailand has abundant natural resources and year-round growing season

There is a quality labour pool available and Thai producers possess valuable expertise, with over 60 years of experience

There is commitment to quality food and safety standards such as Codex, OIE Standards and the International Plant Protection Convention.

Vietnam Key Industries

Infrastructure Industry Capabilities

The government is promoting Public-Private-Partnership (PPP) as well as institutionalising PPP frameworks and regulations to complete infrastructure projects.

In Vietnam, there is a list of projects calling for foreign investments in the industry, of which includes transport infrastructure such as road, railways, airports and sea ports. There are also urban infrastructures such as urban transportation, water supply, solid waste treatment. In addition, there are projects in power infrastructure, infrastructure of industrial parks.

Manufacturing Industry Capabilities

Vietnam has a vast pool of workers with relatively low labour costs and overall low cost of manufacturing

Its location and proximity to regional shipping routes provides opportunities for export manufacturing

Euromonitor International has forecasted smartphones sales demand in Vietnam to grow steadily from the year 2017 to 2021, providing opportunities in the consumer electronics sector

Philippines Key Industries

Manufacturing Industry Capabilities

Since the Philippines is located along a belt of volcanoes, there are metallic mineral deposits formed from volcanic activity and plate convergence. With the rich resources for mining, the Mining and Mineral Processing sector is an attractive business investment

With goals set to increase Philippines’ manufacturing innovation ecosystem, there are also other manufacturing sector to venture into such as aerospace, automotive and parts, electronics or semi-conductors, pharmaceuticals, and shipbuilding.

The Information Technology and Business Process Association of the Philippines (IBPAP) has set goals for policy reforms that support employees’ skills development

The country also has a comparatively low cost of doing business, while generally being known for providing necessary service quality

This industry provides opportunities in sectors such as contact centres, back office services, data transcription, animation, software development, engineering development and game development

Agribusiness Industry Capabilities

There is an increasing demand for agriculture products

The recently approved Philippines’ Investment Priorities Plan (IPP) by the Philippine Board of Investments (BOI), an agency of Department of Trade and Industry (DTI) has emphasised on the importance of its agribusiness industry

The Negative Investment List revision made the industry more open to foreign investments that allow full ownership with investments of more than IDR 100 billion. Nevertheless, if the investments fall below IDR 100 billion, foreign investors are limited to a minority stake where they are only allowed to own 49% of shares.

Tech-savvy population in Indonesia provides opportunities in e-market, e-fulfilment and e-services fields

Increasing use of mobile phones in Indonesia over other digital devices provides opportunities for a mobile-first strategy

With the high hotel occupancy rate in the country at 85% from the period of January to August 2016, there are opportunities in the hotel operations, travel service companies, cruises, as well as the Meetings, Incentives, Conventions and Exhibitions sectors